Kulanu leader Moshe Kahlon.
(photo credit: MARC ISRAEL SELLEM/THE JERUSALEM POST)
The Finance Ministry's January budget report, which typically exhibits a surplus for seasonal reasons, showed a hefty NIS 3.9 billion surplus resulting from unusually high tax revenues.
The overall 2016 budget plans a NIS 35 billion deficit, amounting to 2.9% of GDP. The rolling deficit over the last 12 months stood at just 2.2% of GDP, higher than the final deficit for 2015, which stood at 2.15% of GDP.
The revenue haul for the month came out at NIS 27.4 billion, a nominal 7.8% higher than last January. Expenses came out at NIS 23.8 billion, plus another NIS 4.3 billion in debt payments and 0.1 billion in National Insurance payments.
One of the main drivers of January's high revenues was a bump in imported vehicles. The contrast with last January was particularly wide because vehicular imports were low at this time last year. Direct tax revenues were up 4%, and indirect tax revenues up 17%. Taxes on real estate transactions were up 29% over last January, and the state took in higher revenues from businesses and VAT, despite lowering both rates.
The revenues will be welcome news to Finance Minister Moshe Kahlon, who may have extra leeway to spend when unexpected events pop up during the year.
He may face pressure from the Bank of Israel to bring down the deficit, which is higher than Israel's projected growth for the year. The Bank noted that Kahlon raised the target to 2.9% target from 2%. If the new target is met, the bank noted in a recent report, "this deficit level is not consistent with a reduction of the debt to GDP ratio."
Growing the debt burden would break a positive trend in Israel's fiscal performance.
Moody's recently applauded Israel for being the only rated sovereign other than the Phillipines to show consistent reductions in its Debt-to-GDP ratio in the past six years. The debt-to-GDP ratio fell to 64.9 percent at the end of 2015, from 66.7 the year before.